Health-Care Overhaul Pushes Small Firms to Lock in Lower Rates

Early Renewals of Current Coverage Could Mean Savings for Some Employers

ENLARGE

John Rasmussen, owner of Canfield Industries in Youngstown, Ohio, began looking at early renewal in August.
Jeff Swensen for The Wall Street Journal

By

Ruth Simon

Sept. 30, 2013 7:23 p.m. ET

With major provisions of the federal health overhaul set to take effect Jan. 1, many U.S. insurers are prodding small-business customers to renew their current coverage early, to lock in lower rates.

"With all of the changes coming up in 2014, we want to provide you with options that allow you to make the right decision for you and your employees," said a recent letter from one major insurer, Blue Shield of California, which has made the pitch to all of its small-business customers, who can keep their 2013 rates if they act to renew existing plans by Oct. 14.

Such offers come at a time when many business owners fear their costs will rise sharply next year. "We are trying to jump on lower rates right now," says
John Rasmussen,
the owner of Canfield Industries, an electronics manufacturer with 100 employees in Youngstown, Ohio. He began looking at early renewal in August after attending a seminar on the new health-care law sponsored by his insurance broker. Mr. Rasmussen expects health-care premiums for the 36-year-old company to increase by 10% if he renews this year, compared with a 26% increase if he waits until the firm's normal March renewal date.

ENLARGE

Nearly one-third of small businesses surveyed by The Wall Street Journal and Vistage International said they would renew their health coverage earlier than in prior years. The survey of 881 firms with less than $20 million in annual revenue was fielded online from Sept. Sept. 9 to 18.

Small-business owners should get a preview this week of what their costs may be under the new health care law. On Tuesday, the government will release a "representative sampling" of rates for plans sold on the federal small-business health exchange, a government spokeswoman said, adding that the release will occur even if there is a government shutdown. Firms won't see the specific premiums their business would pay, and won't enroll in the exchange, until November.

Small-business owners routinely renew their health plans once a year, often in January. Renewing early this year, by December, will allow businesses to delay by roughly one year the impact of key provisions of the Affordable Care Act that kick in starting 2014 for those insurance plans that renew after Jan. 1.

The sample 2014 rates that are being released this week could heighten interest among nervous business owners in renewing their coverage this fall, rather than waiting until January. "Not only will it prompt some groups to renew early; it may prompt some groups to shop for a new carrier" to see if they can get a better deal, says
Anthony Lopez,
director of small group sales at eHealth Inc., an online health-insurance marketplace. Some insurers are offering their best rates to small businesses that sign up now for a plan that will stretch through next year in an effort to attract new customers for their plans—this year, in particular. So far, most business owners are renewing early because they expect rates to be higher next year, Mr. Lopez adds, not because of new regulations.

Find Your State's Health-Insurance Exchange

But while firms with young and healthy employees are more likely to save by renewing their health-care plans sooner than normal, companies with older or less healthy workers could actually see their premium costs drop if they wait to sign up for policies that start next year.

The new law will mean savings for companies like DFD Plumbing Inc. in Draper, Utah, which has two employees. Owner
Dennis DeRose
figures his costs will fall by as much as 20% because one of the firm's employees is considered "high risk." Under the law, firms with fewer than 50 full-timers won't face penalties if they don't provide coverage for their employees, but some small employers currently provide insurance nonetheless.

Related

"The absolute truth is that the early-renewal option isn't for everyone," says
Ryan Thorn,
an insurance broker in
South Jordan,
Utah. Based on the data he has reviewed, most of his clients will face premium hikes of 5% to 60% under the new law, but some may see costs drop by 5% to 30%.

Mr. DeRose plans to continue using his current insurance carrier, rather than shopping on the small-business exchange, says Mr. Thorn, his insurance broker, but will save money because of new limits on the amount insurers can charge riskier customers.

Regulators in Illinois, New York, Rhode Island and Washington have taken steps to prevent insurers from renewing small businesses early in order to delay the impact of the law. A Missouri state law limits the insurers' ability to renew health-insurance coverage early.

Related Articles

The Affordable Care Act limits the amount extra that insurers can charge employers with older workers and bars them from basing rates on employees' health. The act, major provisions of which are currently scheduled to take effect Jan. 1, also mandates a set of 10 essential benefits, including maternity care and prescription drugs, most of which are already included in many small group plans.

Insurers have been promoting the early-renewal option as they seek to hold on to small-business customers. Small firms tend to be very price-driven and switch insurance carriers more often than larger employers.

Matthew Maroon,
founder and chief executive officer of Blue Frog Gaming Inc., a manufacturer of software games in Akron, Ohio, opted for early renewal this summer after his insurer, UnitedHealthcare, said the company would face a smaller premium increase for the coming year if it renewed coverage in December instead of waiting until next year.

"It was about saving money," says Mr. Maroon, adding that the 18 employees covered by the plan are mostly in their 20s and early 30s.

"UnitedHealthcare has always provided our customers with the flexibility to manage the value and affordability of their health plans," a company spokeswoman says.

Brent Hitchings,
vice president and general manager, small business markets, for Blue Shield of California, says the early-renewal offers are an important tool for defending market share. If an insurer didn't offer early renewal, small businesses that would save money by renewing early might ditch their current carrier in order to switch to another insurer before year-end, in order to delay the impact of the new health law, he says.

Mr. Hitchings estimates that about one-third of small businesses in California will pay more under the Affordable Care Act, while another third will see costs drop, with "the average impact, both plus and minus probably in the neighborhood of 25% to 30%." The remainder will see a moderate increase of 7% or less.

Figures for other states will depend on how closely their current laws align with the new health-care rules. The price changes are likely to be larger in states that traditionally gave insurers more discretion to charge lower rates to firms with healthier workers.

Scott Whitsitt,
the founder of One-to-One Service.com, a provider of online customer-service and marketing solutions, with fewer than 20 employees, says that he has been receiving frequent reminders from Aetna to renew early. "I'm still trying to figure out what the rates from the small-business exchange will be," says Mr. Whitsitt, adding that it is likely that he will renew early.

Aetna is offering a "Premium Savings Program" that allows small-business owners who act by Oct. 15 to "renew your current rates for 2013," according to one email sent by the company to Mr. Whitsitt. The message describes early renewal as "A simple option for uncertain times."

"Time is ticking—this may be your last chance," Aetna said in a postcard recently sent to Mr. Whitsitt, offering him the chance to "Renew your current plan and save."

An Aetna spokesman says the company has been conducting an "ongoing educational effort."

What this article missed was the fact that small group health premiums have been rising 10-30% annually for the past 5 years. The potential impact of Obamacare is another tool being used by health insurance companies to manipulate their markets, scare their customers and raise revenue....don;t have a problem with them doing that, we should just be aware that they are doing it....this county long ago forfeited its control of its health care to the insurance industry.....we did so blindly and willingly....

Renewing now will allow some employers to postpone dropping health insurance for their employees for a year, giving them time to finish shrinking their full time staff to below 50 personnel and cutting everyone else's hours to below 30 per week.

What we need is a Constitutional Amendment to bar the government from forcing us to buy a product or service against our will. The Right to Refuse Amendment does just that. www.righttorefuseamendment.com/

I have 2 employees with pre-existing conditions. When it came time for my renewal in August, my broker shopped around, but we renewed with our current carrier, and she recommended we wait until the small business exchanges get cranked up, and then shop again.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.